Overseas Pensions: How They're Assessed in a Care Means Test

Some older people have pension income that comes from overseas. Perhaps your parent worked abroad for part of their career, returned to the UK after years living overseas, or moved to the UK from another country and has a pension from their homeland. If care is needed and the local authority carries out a means test, a natural question arises: how is that overseas pension treated?

Here is a general guide to how overseas pensions are usually approached in a care financial assessment. Because this area can get genuinely complex, we will point you firmly towards proper advice for your parent's specific situation.

A quick recap: what the means test looks at

When someone asks the local authority for help with care costs, the council carries out a financial assessment, or means test, to work out how much the person should contribute. It looks at two things: their income, such as pensions and certain benefits, and their capital, such as savings and other assets.

Our guide to local authority funding explains this assessment in more detail. The question here is simply where an overseas pension fits into it.

Overseas pensions generally count as income

Here is the key point, and it is a simple one. A pension from overseas is still income. So in a means test, an overseas pension is generally taken into account as income, in much the same way a UK pension would be.

In other words, overseas pensions are not hidden from, or exempt from, the assessment. If your parent receives a pension from another country, you should expect it to be counted as part of their income, just like any pension paid in the UK. It is always best to be open about all income, wherever it comes from.

The currency question

There is one obvious wrinkle with an overseas pension: it is often paid in another currency. For the means test, it will need to be converted into pounds sterling so that it can be included alongside everything else.

Because exchange rates move up and down over time, the sterling value of a foreign pension can vary, which makes it a little less predictable than a pension paid in pounds. The assessing authority will convert the pension to sterling in order to assess it, and how exactly that conversion is done is one of the practical details worth checking with them.

Overseas savings and assets too

The same broad principle applies to capital. Any savings, investments, or sometimes property that your parent holds overseas would generally be considered in the means test as capital, subject to the usual rules, just as UK savings and assets would be. Overseas property in particular can raise complicated questions, which is another reason specialist advice is valuable.

Where it gets complicated

In the interests of being straight with you, overseas pension and asset arrangements can raise genuinely complex questions that go beyond a simple "it counts as income." These can include:

• how exactly a foreign currency is converted, and at what rate
• whether the income or capital can actually be accessed, or brought to the UK, which can matter in some cases
• foreign tax that may already have been deducted
• the differences between how various countries' pension systems work

These nuances mean the treatment is not always straightforward, and it can vary depending on the circumstances and the country involved. This is very much an area where proper, personalised advice earns its keep.

Tax is a separate matter

One thing worth untangling: how an overseas pension is taxed is a separate question from how it is treated in the care means test. Foreign pensions can involve UK tax, tax in the country of origin, and double taxation agreements between countries, all of which affect the actual income your parent ends up with. That is a matter for a tax specialist, and it is best not to confuse it with the care assessment, though of course the income your parent actually receives is what matters to their overall finances.

Get proper advice

Because this is complex and depends heavily on the specifics, two things really matter:

• Be open with the local authority carrying out the assessment about all of your parent's income and capital, including anything overseas. Transparency is both the right thing and the way to avoid problems later.
• Seek specialist advice. Age UK and Citizens Advice can help with the care funding side, and a financial or tax adviser experienced in cross-border matters can help with the pension and tax side. Given the complexity, this is not an area to try to work out by guesswork.

In short

An overseas pension is generally treated much like a UK one in a care means test: as income that is counted in the assessment. The details, though, particularly around currency conversion, accessing overseas funds, and tax, can be genuinely complicated, so proper advice tailored to your parent's situation is well worth seeking.

Our guide to your funding options sets out the wider picture, and if you would like to talk through funding care for someone you love, we would be glad to help you understand the options.

Book a free care advice call, or give us a ring on 020 3970 9900.

This guide offers general information only and is not financial, tax or legal advice. The treatment of overseas pensions and assets in a care financial assessment can be complex and depends on individual circumstances, so please confirm the position with your loved one's local authority and seek advice from a qualified adviser, or from Age UK or Citizens Advice.